Licensed Moneylenders & Loan Sharks: Knowing The Difference

Licensed moneylenders are lending institutions that are recognised by the law to offer loans to borrowers. On the other hand, unlicensed money dealers are known as loan sharks, where they prey on desperate and easily susceptible people who may not know the difference. These loan sharks offer many disadvantages to borrowers, such as charging high interest rates for short term loans.

Many borrowers tend to mistake loan sharks for licensed moneylenders as they may not admit to the real nature of their business openly. Here are some of the distinguishing features between licensed moneylenders and loan sharks that you need to know to tell them apart.

1. Transparency

Licensed moneylenders are able to give a detailed explanation on the terms and conditions on surrounding agreements such as a debt consolidation loan. They will also include a question and answer session after for you to clear any doubts that you might have during the loan application.

Loan sharks have agreement terms that are vague and difficult to understand for the borrower. They also barely give room for borrowers to ask questions about the terms or conditions of the loan.

2. Contract agreement

Licensed moneylenders require both parties to put pen to paper to show a consensual decision to do business together. A legal practitioner draws up the contract agreement, which includes payback time, interest rates, and others.

Loan sharks have no legally prepared documents for parties to sign. However, there are instances where they disguise themselves by asking borrowers to sign an incomplete form or an unidentified piece of paper.

3. Interest rates

There is a stipulated maximum interest rate that can be charged by lending institutions. Licensed moneylenders do not cross the stipulated maximum interest rate, while loan sharks do not operate similarly. Instead, loan sharks charge very high interest rates on their loans.

4. Verification

Borrowers can visit the Singapore Ministry Of Law website to check for the full list of licensed moneylenders in Singapore. This is where they will be able to verify the legal status of their chosen licensed moneylenders. On the list of licensed moneylenders in Singapore, loan sharks are not a part of the list.

If you are looking to ascertain the legitimacy of any lending institution, you should search up their credentials on the website above. The list also includes a list of dealers whose licenses are on suspension.

5. Professionalism

Licensed moneylenders often deal with clients professionally, where there is no over-familiarisation or casual attitude, even when clients default in payment. Loan sharks, on the other hand, may perform threats, blackmails, and harassment of their clients who have defaulted on their payments when due.

6. Physical office building

Licensed moneylenders have office buildings in accessible locations that are open to borrowers during weekdays. They will interact face-to-face, negotiate, and reach a decision before the loan is issued.

Many loan sharks operate online with attractive websites and numerous links scattered everywhere to lure borrowers to their pages. Or, they might have an office in an obscure or improperly labelled space. These unlicensed dealers are known for their spam emails, texts and phone calls, all in a desperate attempt to get the borrower’s attention.

7. Loan charges

Loan sharks look to tie their loans, such as monthly instalment loans, with multiple hidden charges. They offer flexible and fluctuating rates that are mostly dependent on the lender’s illegal needs. Borrowers may face an increase in interest rates or payments without any prior knowledge.

Licensed moneylenders offer borrowers a guarantee of a fixed interest rate, and do so without any hidden charges.

The differences between licensed moneylenders and loan sharks are stark, if you know what to look for. Ensure a safe borrowing experience by selecting to borrow only from licensed moneylenders.

Bookmark the permalink.

Comments are closed